API Economy Business Drivers: #3 – Innovation

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I was very tempted to make this the shortest blog ever written and end it there. But Uber is only one example of innovation with APIs. Continuing the API Economy Business Drivers series this blog addresses the third business driver in the series – “Innovation”.

The Innovation business driver is about trying something new for your business. It could be an incremental change, a new business model, or an entire new business such as Uber.

The first point I want to make relates to the phrase I just mentioned, “trying something new”. APIs enable a business to “try” things at minimal cost and with rapid pace. The benefits outlined in the “speed” blog from a few weeks ago enable the business to explore new opportunities without the need for changes to the systems of record (SoR) which would require longer more expensive efforts. The phrase often mentioned to describe this is “fail fast”. Failing is not a problem unless it takes too long or is too expensive. If we can make a minimal investment, try a new concept with a specific customer set or channel, and make a determination if this is worth pursuing then this is a very attractive approach even if it is not successful.

While on the topic of exploration, let me also mention Hackathons. Hackathons are a great way to get creative and see what developers can do with your assets. While many ideas that come from Hackathons may not be selected, obtaining a few or even one new business enhancement can be very beneficial and again at low cost. Some companies choose to do internal Hackathons, which is okay. However, many times employees bring with them their knowledge of the existing business which stifles creativity. By using external developers your audience is not influenced by today’s business models and may result in more creative ideas.

Let’s take a look at a few of the more common areas that companies explore in the Innovation business driver area:

Direct API Monetization – by this I mean charging for use of your APIs. Let me be clear that this is only one of many possibilities for API monetization (see my white paper on Monetization models). For this to be successful your APIs must provide value to the consumer and the appropriate metric for billing should be API calls. Otherwise, another monetization model might be more appropriate.

Within this area the most common scenario is exposing your corporate data assets to third parties who will pay you for access to this data (for example to market to your customers). This could be aggregate data or customer specific data if the appropriate opt-in requirements are met. Exposing transactions as monetized APIs is also a possibility with examples including payment processing or checking a customer’s credit.

Devices– many innovative scenarios take advantage of devices in ways they have not previously been used. Connected car scenarios are very common and not limited to the automobile industry. Beside the more traditional connected car scenarios (e.g. service required), other industry scenarios might include insurance for safe driver discounts, retail advertising when a potential customer is nearby, etc.

A similar retail scenario may also be implemented by partnering with a bank, using their ATM as a device that can tell when a customer is nearby. The bank can partner to advertise the retail offering to the banking client sharing some portion of the revenue generated (a different monetization model than earlier discussed).

Business models – how about adding a new way of doing business or doing something different than you have traditionally done? The examples above also apply here. Another example is Starbucks who through the use of their card is now also in the payments business. Telcos can use their platform accessed via APIs to support business services for third party companies such as streaming media, billing, accounting, and analytics.

Some governments are implementing regulations requiring APIs to open up information to fuel innovation. In the EU Banking industry, PSD2 is opening up banking data for new payment scenarios. Open Banking in general is providing significant new business opportunities. In the USA Healthcare industry the “Meaningful Use” rule is requiring APIs in 2018, and the Fast Health Interoperability Resources API exists today. Many governments around the world are also regulating open data initiatives to make government data available to third parties to fuel innovation.

Cognitive– Many businesses are combining Watson services accessed via APIs to innovate and provide new or improved offerings and services to their clients. Services such as personality insights, tone analyzer, and visual recognition can be added to a business’ own APIs to provide a superior offering to a customer. Watson Health is supporting all aspects of the Healthcare and Life Sciences industries innovating rapidly to provide better healthcare.

Innovation is not typically the first business driver companies explore for APIs. Most businesses will start with “Speed”, progress to “Reach”, and then think about “Innovation” after having some experience with APIs from earlier projects. But the promise of rapid innovation, disrupting businesses and industries is real and happening now. Next up in the Business Drivers series – “Domains”.

To understand more about IBM’s thoughts on the API Economy visit the IBM API Economy website. IBM API Connect is IBM’s complete foundation to Create, Run, Manage, and Secure APIs. You can find more information about IBM API Connect at the API Connect website. And you can also experience a trial version of API Connect.

If you have questions, please let me know. Connect with me through comments here or via twitter @Arglick to continue the discussion.